Technology

Samsung Wants to Be the World's Biggest Appliance Maker by 2015

The technology industry hums with disruptive new companies that enter the market by taking share away from others or creating markets of their own. But kitchen appliances? The brands that dominate the field today—Whirlpool (WHR), General Electric (GE), Kenmore (SHLD)—are the same names we’ve known for decades. Samsung Electronics plans to upend that.

The Korean electronics company says it wants to become the world’s largest appliance manufacturer by 2015. It’s already the fastest-growing appliance brand in the U.S., having jumped from 2.3 percent in market share to more than 10.5 percent over the last five years. “We’re on track,” says B.K. Yoon, Samsung’s co-chief executive officer in charge of consumer products such as TVs and appliances. But grabbing the top spot from appliance leader Whirlpool won’t be so easy. Samsung’s appliance-related revenue totals roughly $12 billion a year; Whirlpool took in almost $18 billion in 2012. (Whirlpool declined to comment.) In the U.S. especially, “Samsung has a way to go,” says Eric Voyer, a vice president and former appliance-industry analyst at the Stevenson Co., a market research firm.

At the weeklong International Consumer Electronics Show (CES) in Las Vegas, Samsung announced a Smart Home initiative, which aims to allow owners to use smartphones and tablets to control their air conditioners, refrigerators, washers, and LED lighting. The appliances will also connect to the Internet independently to download new software or let users monitor their homes via built-in exterior cameras. At the Jan. 7 press conference, the company spent as much time talking up its new refrigerators and washing machines as it did its tablets and ultra-HD TVs.

Yoon says his company’s effort to outsell Whirlpool will depend on Samsung’s ability to develop appliances that go further than customers are used to. “The speed of innovation in home appliances is very slow. It’s not like it’s been with phones, PCs, and TVs,” Yoon says. “The first dishwashers were made in 1860, and they haven’t really changed in 150 years.”

Beyond its Smart Home designs, Samsung has pushed appliance-specific features into each product to differentiate them from the competition. Its Chef Collection refrigerator can dispense still and sparkling water, keep different zones cooled to different temperatures, and convert a small fridge compartment into a secondary freezer. The company’s FlexDuo oven comes with an insert that can partition it into two cooking areas heated to different temperatures. At CES, Samsung executives introduced a dishwashing technology called WaterWall, which replaces the familiar rotary spray arm with a linear system that promises to get water into hard-to-reach corners of the dishwasher.

Samsung also aims to capitalize on its association with the Michelin-starred chefs who consulted on its Chef Collection line, including famed French restaurateur Michel Troisgros and California chef Christopher Kostow. The company’s high-end refrigerator has a target price of $6,000, almost 50 percent more than the most expensive Kenmore model. Currently, Samsung’s average price for an appliance is $1,046 in the U.S., according to the Stevenson Co. The industry average is $702.

For Samsung to become the world leader in appliances, it will have to broaden its appeal with cheaper models, says Bob Baird, vice president for appliance merchandising at Home Depot (HD). “Right now they’re a premium brand, but you can’t be No. 1 without capturing the core of the market,” says Baird, whose company began selling Samsung products at the end of 2012.

Yoon knows this. “It would be very difficult for us to reach our goals if we only focused on the premium market,” he says. “If the consumers want us, we are going to be there. But starting at the premium end lets us develop solutions that can start at the high end and then filter down.”

One area in which Samsung may have an edge is consumer recognition that extends beyond appliances. The company’s success in TVs and mobile devices means that far more people are familiar with Samsung than ever before. In 2012, Samsung spent $29 million on U.S. appliance advertising, according to data from Kantar Media (WPPGY), which tracks ad spending. That’s less than the $33 million appliance archrival LG Electronics spent on home goods, and a lot less than the $54 million spent by Whirlpool. Zoom out, though, and Samsung’s advertising dwarfs that of the other appliance makers: In 2012 the company spent $600 million on ads overall. “They have terrific brand awareness, and smartphones help with that,” Baird says. “People come in looking for Samsung.”

The connection to smartphones and tablets goes beyond branding. As a company that already makes mobile devices, Samsung should find it easier to connect its appliances to a home network for remote control and maintenance. Right now only one Samsung washer can be controlled via a smartphone app, but the company is adding its microprocessors and wireless chips to a wide range of appliances. Even if Samsung doesn’t top Whirlpool next year, it’s well-placed to lead consumers into a kitchen full of Wi-Fi-enabled machines. Says Yoon: “We do phones, TVs, semiconductors. We have the technology to build the smart home.”